Many of the commodity products offered by iPath and UBS are structured as ETNs.
3. Commodity-Intensive Equities
Frustrated with the impact of contango on certain exchange-traded commodity products, some investors have turned to equities of commodity-intensive companies as an alternative means of establishing exposure to natural resource prices. Because the profitability of hard-asset producers is often impacted significantly by the prevailing level of prices for the related commodities, a strong correlation generally exists between these assets. However, investors should remember that the holdings of these ETFs are not commodities, but stocks, and as such will generally exhibit a higher correlation with equity markets than spot commodity prices (thereby potentially diminishing one of the primary advantages of investing in commodities). There are a handful of ETFs offering both broad-based exposure to asset producers (e.g., HAP) as well as more targeted exposure to gold miners (GDX, PSAU), agribusiness companies (PAGG, MOO), timber stocks (CUT, WOOD), and steelmakers (SLX, PSTL). A complete list of the ETFs included in the Commodity Producers Equities ETFdb Category is available here. 3b. IndexIQ ARB Global Resources ETF ( GRES) This ETF employs a unique investment strategy to offer exposure to commodity products, and as such is worthy of its own subset of the commodity-intensive equities heading. GRES invests in global companies that operate in commodity-specific market segments, but also includes short exposure to the S&P 500 and MSCI EAFE Index, essentially isolating the return component generated through movements in commodity prices. At the time of publication, Johnston had no positions in ETFs mentioned.